The rumored partnership of Nokia and Microsoft has come to pass, as Nokia announced today that it is going to embrace Windows Phone as their primary smartphone platform. I’m not going to go into a deep analysis of the keys to success. That will be well covered in the news today. The big one obviously is how many platforms will developers support? iPhone, of course. Android is on the cusp of becoming 1a to Apple’s 1. A must-do platform. In certain markets (e.g., enterprise), Blackberry is 1b or at least a strong contender. HP made its WebOS move earlier in the week, with some interesting value propositions, linking computers, tablets, phones and peripherals. What would make Windows Phone compelling for developers?

Nokia has had its own set of challenges. While they long said they were the world’s largest Smartphone company, they were kidding no one. Once the iPhone came out, they were yesterday’s news. Once Android gained momentum, they were in full denial mode. They missed key trends (like Americans were buying clamshell phones) and took years to rectify the shortcoming, never to regain market position.

So now Nokia and Microsoft are partnering. Not surprising, considering where Nokia’s new CEO, Stephen Elop came from. (Microsoft, if you don’t already know.) It didn’t take him long on the job to conclude that Nokia’s own efforts were failing and ultimately failed. Nor did it take him long to conclude that his best strategic bet was Microsoft. Given his background and their mutual desperation, it didn’t take long to conclude this deal. In some ways, it’s almost stunning in its rapidity.

I just want to ask one simple question: when have two waning market players ever combined together to create one market-winning entrant? I was sitting in a session yesterday at New York’s Social Media Week next to IBM AR star Mauricio Godoy and I asked him to come up with any examples of where this had worked. Interestingly, he came up with a couple of situations. Involving musical artists/groups. I’m not sure they were entirely compelling but at least they had merit worth discussing. But neither he nor I, nor anyone else I’ve asked this question to, could come up with a compelling instance where two fading businesses combined to reassert market leadership or even competitiveness.

Combining my problems with your problems sometimes solves both our problems. More often, however, it increases complexity and amplifies both of our problems. Friend and fellow analyst Bob EganTweeted this morning “Execution has been Nokia’s shortfall yet now it seems they are taking on even more execution complexity. Was hoping for simpler more focused.”

Often in business conversations, you hear people say that they’re looking for situations where 1+1 is greater than 2. Here we have a situation where 5+4 is supposed to produce 1 or 2. Now I admit that I’m just old enough that I missed the “new math” in high school. (My sister, two years younger, learned it.) But I don’t see the math working. And in a market so dynamic and fast-moving, combining these two entities, neither of them known for their speed, may just hasten their mutual demise. (I would, however, love to hear of successful business combinations in this vein in the comments. Anyone?)

As I discussed in my last post, mobile is a space Microsoft needs to win if it’s to remain as relevant in this decade as it was in the last two. I’ll never underestimate Microsoft’s power and, more importantly, its stubbornness/tenacity in battles it must win. However, there are so many moving parts in this space and so much potential for Microsoft’s efforts to go awry that it’s very hard for me to develop any enthusiasm for Windows Phone 7, launched yesterday.

Let’s just look at some of those challenges:

User interface. Microsoft looked at the iPhone and unlike Google, which said “we should copy that,” instead said “we can do better than that.” Trying to out-interface Apple is a daunting proposition. Has anyone done that? Ever? And in any event, is this the time it’s going to happen? I’ll give Microsoft credit for realizing that perhaps the market didn’t need yet another iPhone clone. However, its approach is actually at odds with how it has succeeded on the desktop. The desktop and to a large extent the iPhone and Android worlds have succeeded because they’re open platforms upon which application developers can unleash their creativity and users can freely and equally access that creativity. Instead here Microsoft has said “we know what activities you do with your phone and we’ll make those more prominent.” If this is actually a static set of activities common across a wide enough range of users, I’d actually applaud that approach. However, I don’t believe it’s at all a static set of activities and I think there’s sufficient variation from user to user that this approach will generally suffer. Sure, if you’re a Zune person, great for you. Both of you. But I don’t think many users are thinking “wow, this iPhone is too tough to use; I wish someone would simplify my choices for me.”

Does Microsoft’s approach make it harder for application developers to achieve prominence? With Microsoft controlling so much of the initial user experience, applications are relegated to a less prominent position. This might discourage application creativity in areas Microsoft considers “core,” like pictures or social networks, and might hurt application developers whose applications might otherwise be considered core by users but are relegated to less prominence on WP7.

How many platforms can the market support, anyhow? It’s clear Apple is a long-term survivor. I don’t say “leader” because ultimately that’s not their business model. They don’t play in high volume, low margin spaces and make no mistake about it, the smartphone market is going to be high volume in very short order. Blackberry is positioned to be a survivor as a niche solution. Their investments in corporate-relevant infrastructure mean that they can be a trusted provider for key scenarios even while other providers infringe on them at the margin. That means that Android, HP/Palm, Nokia/Symbian and Microsoft are left fighting for markets that can only support one or two of those parties. The decision may actually rest on more than just smartphones, which leads us to our next discussion.

Whither the tablet. Android needs rework to adequately support tablets. HP is going to move Palm into a variety of Internet-connected devices, including tablets, printers and more. What’s Microsoft’s tablet strategy? I’ll need more time looking at WP7 to assess whether this is a viable UI for tablets or whether it’s more likely to be some evolution of Windows not-Phone 7. If, however, WP7 is not a tablet or other embedded device OS, that constrains the market opportunity for WP7 and thus its attractiveness to application developers.

Velocity. Microsoft’s track record at getting operating systems out the door is, well, spotty. (I’m feeling charitable today.) The velocity in the phone market is a radically different dynamic than on the desktop. Upgrade cycles are measured in weeks and months, and certainly not years. Is Microsoft going to be able to maintain that pace and do so in a way that doesn’t jeopardize product quality. Their track record is sobering.

However, Microsoft is in an interesting position when it comes to the carriers, especially here in the States. The carriers have a love/hate relationship with Apple. They’d love to have the iPhone. They hate that Apple gets to dictate all of the terms. With Google, it’s more of a wary situation.

While Google is more complicit with the carriers than Apple, the carriers are (rightly) suspicious of Google’s motivations. If Google isn’t exactly making money licensing the core platform, then what’s in it for Google? Clearly Google views this as an essential step in moving its ownership of the search space on desktops into a mobile world. Thus, at some level, Google’s economic rationale and that of its partners are competitive and/or misaligned. That doesn’t make for a great partnership. Google competitors all around are trying to drive stakes into that misalignment with these patent lawsuits that further the economic risk elements and point out some of the inequities in the relationship (I get the benefit, you assume the risk). That said, unless we’re about to change the patent landscape and head to Armageddon like situations, these things usually resolve themselves with small amounts of money changing hands. I actually think that should one of the involved parties pursue these patent matters to full resolution, it will be counter-productive and will in fact hasten the time when we see patent reform up to and including the elimination of software patents, many of which, to this outside observer, seem, well, patently absurd.

So where does this leave Microsoft? To the carriers, Microsoft may actually seem like the most benign of the three partners. At least they understand Microsoft’s licensing model and appreciate the fact that Microsoft was their complicit partner on earlier Windows Mobile platforms (even while such complicity rendered the platform in need of its very replacement). Again, I’ll write about my dislike for the carriers in a future posting. They still hold to a desire for control that is unhealthy for the ecosystem and for us users. But given that they hold on to these notions, their desire to partner with someone who will cow-tow to their mandates is strong. If Microsoft’s willing to be that partner, all may not be lost for them.

Of course, that means that a Microsoft victory could be very bad for the rest of us…